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US FX Market Open –Friday July 28, 2017: CHF remains under pressure

Posted by Marge Maresca on Jul 28, 2017 10:08:00 AM



Overnight Events

• EUR/USD +0.35%, USD/JPY +0.01%, GBP/USD +0.13%, EUR/GBP +0.19%
• DXY -0.18%, DAX -0.74%, FTSE -0.69%, Brent +0.5%, Gold -0.01%
• Consumers, businesses likely spurred U.S. economic pickup in Q2
• U.S. Republican effort to gut Obamacare ends in defeat for Trump
• DE Jul CPI prelim y/y, 1.7% vs f'cast 1.5%, prev 1.6%
• DE Jul HICP prelim y/y, 1.5% vs f'cast 1.4%, prev 1.5%
• EZ Jul Economic sentiment, 111.2 vs f'cast 110.8, prev 111.1
• EZ Jul Business climate 1.05 vs f'cast 1.12, prev 1.15 rvsd 1.16
• EZ Jul Industrial sentiment, 4.5 vs f'cast 4.3, prev 4.5
• EZ Jul Services sentiment, 14.1 vs f'cast 13.2, prev 13.4 rvsd 13.3
• EZ Jul Consumer confidence final, -1.7 vs f'cast -1.7, prev -1.70 rvsd -1.3
• EZ Jul Cons Infl expec, 11.7, prev 13.0
• China's urban unemployment rate stays below 4 pct for 2nd straight quarter
• UK's Hammond wants two-year market access Brexit deal, plus implementation phase-FT
• Japan's factory output seen rebounding in June as global demand picks up
• Achieving inflation target later, FY ’19 eyed, as already communicated
• Japan June core CPI +0.4% y/y, as eyed, Tokyo July core +0.2%, +0.1% eyed
• Tokyo July core CPI rise fastest since May ’15
• Japan June household spending +1.5% m/m, +2.3% y/y, -0.1% and +0.6% eyed
• BoJ July 19-20 minutes – Concerns over credibility, ETF buys
• Oil extends gains, on track for biggest weekly gains this year

• EUR/USD tethered to 1.3bln 1.1700 expiries. 1.1672-22 range today
• Options pricing just 30 pips break even between now 10am NY cut Monday
• Setback from post FED 30mth peak 1.1777 to 1.1650 Thurs, now support
• 10DMA/Tenkan 1.1625, 23.6% 1.1119-1.1777 at 1.1621 underpin
• Solid EUR/CHF demand aids support, as does better German CPI
• Many banks lifting EUR/USD forecasts, 1.20 favoured by Sept ECB
• Option vols and EUR calls stay bid to reinforce view of more EUR gains

• USD/JPY range has been 110.87-111.33
• Bears fustrated by 2.6 yards of 110.80-110.00 NY cut expiries
• Obamacare repeal bill failure should weigh on dollar/limit rise
• Plenty of Japanese bids down to 110.00 barriers which may limit falls

• EUR/CHF rallied from 1.1305 to 1.1381 during the European am
• 1.1381 = fresh 30mth high. 1.1305 was pullback low from 1.1364 Asia peak
• Stops above 1.1300 were tripped in Asia: CHF/JPY selling mooted as catalyst
• Toshiba-Landis IPO repatriation tipped as source of CHF/JPY selling
• EUR/CHF traded as low as 1.1009 Monday, before Jordan view on EUR/CHF
• Jordan said CHF still significantly overvalued vs EUR at 1.10 (Le Temps)

• Cable met headwind at 1.31 after rising from 1.3070 (European am low)
• More offers expected around 1.3150 & pre-1.32 (option barrier level)
• 1.3159 was 10mth high Thursday before drop to 1.3050 on USD buy-backs
• Scope for more USD buy-backs if US Q2 GDP comes in at/above 3.0%
• 2.6% is consensus forecast (Reuters poll). Data due 1230GMT
• Large 1.3000 & 1.2950 option expiries for NY cut, GBP 589mn & 621mn strikes

• Large 1.2550 option expiry for NY cut is helping to anchor USD/CAD
• USD 470mn strike. 1.2530-1.2567 = Friday range-to-date
• USD buy-backs fuelled USD/CAD rise from 1.2414 to 1.2575 Thursday
• 1.2575 test/break risk will increase if US Q2 GDP comes in at/above 3%
• US Q2 GDP data due 1230GMT, alongside Canada GDP data
• Canada May GDP f/c +0.2%. 35% chance of BoC hike Sept 6-BOCWATCH/Eikon

• AUD/USD met headwind pre-0.80 after rallying off 0.7953 (Asia low)
• 0.7991 = early Europe high, 0.7848 = subsequent low
• 0.7948 approximates to 61.8% of recent rise from 0.7877 to 0.8066
• AUD/USD could retreat further if US Q2 GDP comes in at/above 3%

• NZD/USD eased to a fresh intra-day low of 0.7466 during the European am
• 0.7466 = 91 pips below Thursday's 26mth high, re: USD buy-backs
• Scope for more USD buy-backs if US Q2 GDP comes in at/above 3%

Chart - (Source:ThompsonReuters)

EUR/CHF shifts through gears to target 1.2010
EUR/CHF bulls tighten their grip, with scope for gains back towards January 2015's 1.2010 high in coming weeks. The cross is well above the 30-day upper Bollinger band currently at 1.1226, a sign that bulls have the upper hand as it shows a clear upside skew. Fourteen-day momentum is the most positive reading since August 2015 while the 10- and 30-DMAs are positively aligned, reinforcing the upside bias. The 30-day lower and upper Bollinger bands are diverging, reinforcing the increase in statistical volatility so the market will be prone to continued larger than usual ranges. Interim support is by Friday's 1.1263 low and this should stem near-term corrective moves. Expect demand circa 30-day upper Bolli band. Chart:


Topics: US FX Market Open


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